Having trouble finding a Muni - Bonds fund? American Century CA High Yield Municipal Investor (BCHYX Quick QuoteBCHYX - Free Report) is a potential starting point. BCHYX bears a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes BCHYX as Muni - Bonds, which is a segment packed with options. Muni - Bonds funds invest in debt securities issued by states or local municipalities. These are generally used to finance construction of infrastructure, pay for schools, or other government functions. Some are backed by taxes (revenue bonds), while others are " general obligation " and may not be backed by a defined source. Investors usually appreciate the tax benefits that come with many municipal bonds, which are especially impressive for those in high tax brackets.

History of Fund/Manager

American Century is based in Kansas City, MO, and is the manager of BCHYX. American Century CA High Yield Municipal Investor made its debut in December of 1986, and since then, BCHYX has accumulated about $714.74 million in assets, per the most up-to-date date available. The fund's current manager, Joseph Gotelli, has been in charge of the fund since January of 2012.

Performance

Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 0.75%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 2.55%, which places it in the middle third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. The standard deviation of BCHYX over the past three years is 8.64% compared to the category average of 12.76%. Looking at the past 5 years, the fund's standard deviation is 7.46% compared to the category average of 12.16%. This makes the fund less volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.

For investors who think interest rates will rise, this is an important factor to consider. BCHYX has a modified duration of 8.33, which suggests that the fund will decline 8.33% for every hundred-basis-point increase in interest rates.

Income

Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 4.75% means that a $10,000 investment should result in a yearly payout of $475.

While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.

Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks. BCHYX carries a beta of 0.84, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 0.74, which measures performance on a risk-adjusted basis.

Ratings

Investors should also consider a bond's rating, which is a grade ( 'AAA' to 'D' ) given to a bond that indicates its credit quality. With this letter scale in mind, BCHYX has 28.31% in high quality bonds rated at least 'AA' or higher, while 23.15% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of BBB, and focuses on medium quality securities.

However, it is worth noting that 44 % of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, BCHYX is a no load fund. It has an expense ratio of 0.49% compared to the category average of 0.89%. BCHYX is actually cheaper than its peers when you consider factors like cost.

Investors need to be aware that with this product, the minimum initial investment is $2,500; each subsequent investment needs to be at least $50.

Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.

Bottom Line

Overall, American Century CA High Yield Municipal Investor ( BCHYX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, American Century CA High Yield Municipal Investor ( BCHYX ) looks like a good potential choice for investors right now.

For additional information on the Muni - Bonds area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into BCHYX too for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.